Samsung and Apple, the world's top two phone manufacturers are locked in a court battle that's threatening their supplier-client relationship. (Source: Into Mobile/AP)

Ultimately Samsung's device business -- whose revenue grew 500 percent last quarter -- is more valuable to it then its fast-growing (but not THAT fast growing) supplier business.

Analysts suggests Apple's customers may hardly notice the difference, even if they're paying more

Even as
Samsung Electronics Comp., Ltd.'s (SEO 005930) legal woes [1][2][3][4][5] regarding Apple, Inc.'s (AAPL) campaign of
lawsuits and trade court complaints continue, it faces a perhaps more serious
crisis in the form of aneroding supply relationship with its legal rival. Samsung
currently "has its cake and eats it too", enjoying a position in that
it's theworld's second largest phone manufacturer, and at the same
time drawing a great deal of revenue from the world's largest phone
manufacturer, Apple, whom it supplies NAND flash memory. But that
comfortable situation for Samsung could be coming to an end.

I. Apple Expected to Dump
Samsung

Nho Geun-chang, an analyst at HMC Investment Securities tellsReuters inan interview, "Samsung's tablet business will be
most affected and its chip business will also take a hit as Apple moves to
diversify away from Samsung to the likes of Toshiba. For Samsung, (the) biggest
concern is reduced order from Apple. Without Apple's big backing, it would be
difficult for Samsung to boost its chip market share sharply."

Mr. Geun-chang suggests that while the chips from rival suppliers will
likely be slightly inferior in reliability, power performance, and other
metrics, and may increase device costs, Apple's unquestioningly loyal customer
will hardly notice the difference. He comments, "Apple is leveraging
the fact that it's got alternative suppliers. They may offer inferior or more
expensive components but it's something consumers barely notice and something
Apple can successfully use to pressure Samsung."II. Device Business is More
Lucrative for Samsung

The battle against Apple may prove painful, given the slow death of its
lucrative supply contract, but it's one that Samsung must commit to, according
to Mr. Geun-Chang.

Samsung's supplier contracts to Apple in calendar Q1 2011 constituted 5.8
percent of its revenue, up from 4 percent ($5.7B USD) a year prior. But
its devices business is too valuable to sacrifice even for the lucrative supply
contract -- device sales will soon constitute over half of the company's
revenue, according to analysts. States Mr. Geun-chang, "[T]aking
passive steps for fear of losing its biggest customer will slow down strong
growth momentum at its telecoms business, which Samsung doesn't want to see as
the business is set to become the biggest earnings generator this year and make
up for weakening chip profits. It'll be a costly battle for Samsung."

Some say the lawsuit campaign could hurt Apple more than Samsung.
Aside from possible quality and price issues with a supplier switch,
Apple may be creating the perception that Samsung is the best of the
competition. States Choi Do-youn, an analyst at LIG Investment &
Securities, "These legal battles are raising perception among consumers
that Samsung is the only one capable of competing against Apple."

There's some truth in that belief. Samsung is by far the top
Android phone manufacturer and holds a huge lead in tablet sales over other
Android manufacturers. In the tablet sector it's the only company to be
currently giving serious chase to Apple, selling 7.5 million tablets in H1
2011, compared with Apple's 14 million.

On the smart phone side Samsung's diversified approach is paying even
greater dividends. The company's broad lineup, which includes thebest-selling Galaxy family of smart phones, posted 500 percent
growth in Q2 2011, compared to an impressive, but lesser 142 percent growth by
Apple. Some expect Samsung to dethrone Apple's brief reign atop global
smart phone sales (by manufacturer) when the Q3 2011 numbers come out next month.

Samsung and Apple are now suing each other in at least 23 lawsuits or
trade complaints in 10 different countries. One key trade complaint will
be Apple's request to ban sales of Samsung's tablets and smart phones, via an
import ban, which theU.S.
International Trade Commissionwillconsider[docket record] next month. In anticipation of that hearing,
Verizon Communications, Inc. (VZ) hasfiled a friend of the court briefon behalf of Samsung, saying an import ban would create economic
harm to U.S. customers and lead to job loss.

Some are holding out hope that the pair will settle their dispute outside
court,similar toApple and Finland's Nokia Oyj. (HEL:NOK1V).
Comments HSBC analyst Daniel Kim, "The most likely scenario is
an out-of-court settlement, after a long-drawn IP battle... As in the case of
the Nokia-Apple dispute, this issue too is likely to be settled out of the
court, after a long drawn legal dispute."

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Well, maybe from the techie point of view or from a BlackBerry user point of view iPhones suck but my point was that those BB addicts and techies are the minority, and majority doesn't care about your BlackBerry style notification LEDs and what not. They just want some slick, reliable, versatile, universal, multifunctional and simple to use device, and iPhone is just that. Hence its success.

I'm sure that if WinMobile implemented intuitive UI, proper multitouch and proper web browsing experience first, before iPhone, than maybe iPhone would be much less successful than it is now. But alas, MS dropped the ball as usual. What a pity.

Excuse me, but an iPhone by far isn't 'simple to use', in fact it's excruciating. If Apple is so good, why can't it figure out a simple fact that modern screens, when they are off, don't display any information and just stay black? You'd have to press a button in the very least to find out what's going on with your device. Isn't it just moronic that they ignore that? How do you know if you've got mail, a call, whatever? This is simply unusable at the lowest possible level, I'm not talking about satisfying nerd needs or the like.

It's very simple dude. Whatever your gripe with iPhone is - masses don't care about it. Apple has found out what masses really want and looks like masses do not care about your notification LED stuff or what not. Hence the insane iPhone success. Easy eh?

Or, perhaps, Apple has figured out that the "masses" you speak of are just too DUMB to know what they want, and only wish to be told what they want......which Apple has happily done, with phenomenal success.

Lemmings pretty much had the same fate with the Pied Piper, if I recall....

quote: Apple has figured out that the "masses" you speak of are just too DUMB to know what they want, and only wish to be told what they want......which Apple has happily done, with phenomenal success

But the other companies were too dumb and too slow to tell the masses what they want. Only Apple was smart and fast enough to do that. Hence the Apple success - because Apple is smarter and faster than the others. Got it?